Kittelson, still active on school issues, is frustrated that the dwindling taxes she pays on the local option levy aren't doing enough.

"You wanted to get the money to keep certain programs and teachers, but instead we ended up cutting them," she said.

Pam Martin

Across the Portland metro area, school districts are seeing local option levies fail to raise the money intended when voters approved them. The collapse of the real estate market is one reason. But another stems from a decision that Oregon voters made more than 20 years ago.

Tigard-Tualatin School District is one of four districts in the Portland metro area that are pushing the state Legislature to exempt local option levies from tax limits that have existed since 1990. They say the limits, combined with sharp declines in real estate values, means property owners are paying only a fraction of the school levies approved by voters.

Tigard-Tualatin lost an estimated $4.4 million this year -- the bulk of the $6.7 million lost by school districts in Washington County.Portland Public Schools lost $25.8 million. Hillsboro, West Linn-Wilsonville and Lake Oswego school districts lost more than $1 million each.

Statewide, the number is $74.5 million.

So what could voters have done 22 years ago that would be hurting school districts today?

The answer is both complicated and quite simple.

The simple part is this: In 1990, voters passed Measure 5, setting various limits on property taxes. One of those limits was on school funding. No matter how many taxing districts were out there, an individual property owner would pay no more than $5 per $1,000 of real market value in education taxes (excluding bond levies). For example, if you owned a home appraised and assessed at $200,000, you would never pay more than $1,000 a year for school taxes.

In 1997, the real market value was separated from the assessed value. Properties were taxed on 90 percent of the real market value, creating a new, lower assessed value. And that assessed value could increase no more than 3 percent per year.

But what if multiple tax districts popped up and each of them taxed your property? Let's say the local school district charged $3.50 per $1,000 of the assessed value, then later added a local option levy that tacked on another $1 per $1,000. But there's also a regional education service district charging 50 cents per $1,000, and a local college district charging another 50 cents. Add those up and you're being charged $5.50 for every $1,000 in assessed value. The bill on your house is now $1,100.

Well, that's when the Measure 5 limit kicks in, bringing your total bill back down to $5 per $1,000 of real market value.

So which of those taxing districts loses out? There's an order for that, too, and the first one on the list is the local option tax. In our example, that $1 per $1,000 local option levy is effectively reduced to 50 cents per $1,000 for your house. In tax talk, it's called "compression."

With the housing market collapse, market values declined, causing the Measure 5 limit to reduce taxes more than in the past. With values significantly lower, the local option levy is bringing in far less, causing the shortages.

To compound things, as the state has reduced school funding, districts have increased their basic tax rates, and many of them are near or above the $5 limit, further reducing local option levy rates and pinching other districts.

In Tigard's case, the combination of its regular tax rate and the local option levy is $5.9592 per $1,000. Adding two other districts -- Portland Community College and the regional education service district -- the total bill is $6.3937 per $1,000 -- or $1,279 on your $200,000 home

That's when Measure 5 "compresses" that down to the $5 limit, first by cutting into the local option levy, then into the regular taxing rates for each district.

The end result is taxing districts competing for that $5 per $1,000.

Right now, there seem to be two quick solutions. The districts could work together to keep the taxes under the Measure 5 limit. Or, the voters could exempt local option levies from the Measure 5 limit by amending the Oregon Constitution.

In Oregon, messing with Measure 5's tax reform is a political gamble that few politicians want to take on.

But school leaders say that exempting local option levies makes sense because voters intended to tax themselves above the normal rates to raise extra cash for their schools. Measure 5 is preventing that from happening.

"It's unfortunate that people say we're willing to pay more taxes but then can't raise the revenue that's intended," said Chris Fick, finance and tax researcher with the League of Oregon Cities, which is pursuing a constitutional amendment to exempt local option levies.

Maureen Wolf, Tigard-Tualatin's school board chair, said she plans to speak with representatives in support of potential legislation.

"There's no option to pay more even if home values decrease," she said. "I try to stay out of politics but I'll go after this one."

The League of Oregon Cities introduced a bill in the 2011 session but it didn't generate enough support, Fick said. Now that school districts have raised concerns, the League will introduce a referral in the 2013 legislative session.

Local option levies would still be voter-approved and must be renewed every five years, Fick said. But exempting those levies from the Measure 5 tax limit could help restore revenues to their original levels before the housing market crashed.

Without a fix, local school districts are unsure whether local option levies are much help since many districts are near or past the $5 taxing limit.

Portland Public Schools has a permanent rate at $5.27 and has a local option levy close to $2. Lake Oswego School District has a permanent rate of $4.47 and a local option of $1.39. West-Linn has a permanent rate of around $4.86 and a local option levy of $1.50.